Welcome to the NetApp, Inc. fourth quarter and fiscal year end 2009 earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Ms. Tara Dhillon, Investor Relations with NetApp.

Good afternoon everyone. Thank you for joining us today. Our call is being Web cast live and will be available for replay on our Web site at www.netapp.com along with the earnings release, the financial tables and the GAAP to non-GAAP reconciliations. Today we are also presenting slides concurrently with our audio remarks. They will be available for download on our Investor Relations site at the end of this call. In the course of today’s call we will make forward-looking statements and projections that involve risk and uncertainty, including statements regarding our financial performance in future periods, including FY2010, our expectations regarding the synergies and other anticipated benefits resulting from our proposed acquisition in Data Domain, including that it will be accretive within 12 months of the transaction to close, the expected timing of when the transaction may close, and our expectations regarding integrating Data Domain into our operations. Actual results may differ materially from our statements or projections. Factors that could cause actual results to differ from our projections include, but are not limited to, customer demand for products and services, our ability to maintain or increase backlog and increase revenue, increased competition, our ability to successfully complete our acquisition of Data Domain and integrate its operations into our own, and the material and adverse global economic market conditions that currently exist. Other equally important factors are detailed in our accompanying press release as well as our 10-K and 10-Q reports on file with the SEC and also available on our Web site, all of which are incorporated by reference into today’s discussion. Please note that all numbers are GAAP unless stated otherwise. To see the reconciliation items between non-GAAP and GAAP refer to the tables on our press release and on our Web site. We would also like to notify you that in accordance with SEC guidance published on August 22, 2008, NetApp will begin to disseminate material information about the company through our corporate Web site within the next several fiscal quarters. We intend to designate a separate portion of our Web site for purposes of these disclosures and will include a prominent link on our home page to allow visitors to locate this information, which NetApp will routinely update. The Web site will supplement, rather than replace, NetApp’s current existing channels of information distribution. With me on today’s call are Dan Warmenhoven, Chairman and CEO; our President and COO, Tom Georgens; and our CFO, Steve Gomo. Dan will start with a brief discussion of today's acquisition, then Steve will review the fourth fiscal quarter financials, and Tom will discuss our operations and our opportunities. Dan will wrap up with some closing comment before we open the floor to Q&A. I’ll now turn the call over to Dan.

I would like to start by saying how pleased we are to have the Data Domain team join the NetApp team. The addition of Data Domain to the NetApp family will bring a complementary product line with high growth and high synergy to our portfolio. We will provide them with access to markets, channels, and opportunities they haven't yet been able to reach. We believe that a combination of NetApp and Data Domain can drive more revenue at less cost than could have been accomplished separately. With their deduplication optimized back-up solution for multi vendor storage environments, Data Domain has been very successful selling to mid-sized and large enterprise customers. They are in the early phase of making the investments necessary to move more broadly into international markets and expand their channel to serve more enterprise class accounts, which requires a significant amount of resources. With 60% to 70% of our business coming from the enterprise segment, along with our global distribution and customer support capabilities, we bring tremendous leverage to their highly differentiated technology. Combined with our primary secondary and VTL capabilities, we will offer an end-to-end storage infrastructure for any customer environment. We see a lot of cross sell and up sell opportunities as well. With less than 6% overlap in our existing storage 5000 accounts, the combination of our two companies should help us increase our penetration with each of our customer bases. We plan to operate Data Domain as a separate product line and a separate product management and development organization within product operations. The similar nature of their model—they, too, are a software-based solution wrapped in standard commodity components—should help foster a smooth and rapid transition. They have an outstanding record of new account acquisition and our objective will be to sustain and amplify that momentum while offering them the leverage on NetApp's global sales and service infrastructure as well as significant new opportunities within existing NetApp accounts. On the strategic side that's about the extent of what we can share with you until the transaction closes sometime later this summer. Steve will talk briefly about the financial aspects of this deal, so at this point I will turn the call over to him for his quarterly review.

We are very excited about the opportunities today's acquisition brings but before we discuss the terms and the project financial impact of the transaction, let's walk through our fourth quarter financial results. Non-GAAP revenue for the fourth quarter was $880.0 million, up almost 1% sequentially and down 6% from fourth quarter last year. GAAP revenue was $715,000 less than non-GAAP revenue due to an interest payment to the federal government related to the GSA settlement. Foreign currency effects decreased our sequential results by about 0.3% and decreased our year-over-year growth by almost 4%. Over the past two quarters we have seen a marked increase in the number of one-year renewals of both software entitlements and service maintenance contracts as many customers look to defer capital purchases and extend the life of their current systems during this economic downturn. As a result, current period purchases of systems slowed, with product revenue down 4% sequentially and down 20% year-over-year to $506.0 million. Add-on software, which is a subset of product revenue, was 18% of total revenue. However, revenue from software maintenance and entitlements, which is a deferred revenue element, was at a record high of $165.0 million, or 19% of total revenue. Software E&M was up 5% sequentially and 21% year-over-year. Total software, the combination of add-on software and software E&M, was 36% of total revenue compared to 37% in Q3 and 38% in Q4 of last year. Revenue from services was also a record $210.0 million and 24% of total revenue, up almost 11% sequentially and up 22% over Q4 last year. Services revenues are comprised primarily of hardware maintenance, support, and professional services. Revenue from service maintenance contracts was another deferred revenue element and was almost 60% of our services revenue category this quarter. In Q4 it increased 9% sequentially…

I would also like to echo my excitement about the acquisition. Data Domain is a high-growth innovation leader that is accelerating the adoption of disk as an integral, and in some cases sole component, of customers' back-up solutions. At our last analyst day I spoke of four major trends in the industry where NetApp intends to capitalize. Among them were back up redesign and storage efficiency. Data Domain storage efficient back up and archival solutions are absolutely consistent with and contribute significantly to that strategy. NetApp has an especially strong position in backuping and archiving deals when NetApp owns the primary storage footprint. Data Domain allows us, along with our existing VTL product, to actively participate in the much larger number of secondary storage opportunities that exist when we are not the primary storage provider. Returning to NetApp's fourth quarter, we saw several encouraging signs in our business. Revenues were up from Q3, our mid-range products had a resurgence, both our federal and European geographies were solid, and our top enterprise accounts had a substantial sequential increase in revenue. Storage efficiency continues to be the number one demand driver for our business during this challenging economic period as we allow customers to meet their business objectives with less physical storage, a commitment we will guarantee. Last quarter we discussed that the portion of our business most impacted by the downturn has been our top 50 enterprise accounts, which we call our TEAs. This quarter we saw a 22% sequential increase in their contribution, accounting for 26% of our total revenue, however, we saw a significant increase in orders from customers renewing software and service maintenance contracts rather than incurring the capital expense of a tech refresh. In fact, there were a record number of one-year maintenance renewals this quarter. This…

In looking back on our fiscal year 2009, NetApp ended up faring well in light of the economic environment. We achieved record levels of new customer accounts this year. Customers are increasingly turning to NetApp for the answer to their intractable problem of growing data and shrinking budgets. We offer them lower costs, easier manageability, and a smaller hardware footprint, and our software intensive solution preserves our gross margins, even in challenging economic times. With non-GAAP annual revenues up 7% we were below what we hoped to achieve this year but relative to the industry I feel good about our accomplishments. We have also expanded our operating margins three quarters in a row, demonstrating our commitment to controlling expenses. While it was unfortunate that we had to implement the restructuring plan that we announced early in the fourth quarter, given the challenging business environment, it was the prudent thing to do. It gave us the flexibility to implement changes intended to optimize our resource allocation, improve our efficiency, and bolster our growth potential while at the same time reducing costs. Our goal in any economic environment will continue to be the expansion of our long-term market share and we believe the actions we have taken will help us achieve that. Looking now to Q1, there are a number of variables which will affect our bookings and revenues in this quarter. Our fiscal Q1 tends to be seasonally down from Q4. This Q1 is a 14-week quarter, as we realign our fiscal year for the calendar. We also plan to shut down our headquarters and development locations for the week prior to the Fourth of July. Customers budgets seem to have solidified somewhat, albeit at lower levels than last year. Some are choosing to extend the life of their existing systems…

(Operator Instructions) Your first question comes from Keith Bachman – BMO Capital Markets. Keith Bachman – BMO Capital Markets: My question, Dan, is for you. In the past you have commented that deduplication was a feature not a product and I'm just wondering how your changing has evolved due obviously to the pending acquisition of Data Domain?

Actually, my view has not changed. I mean, deduplication is in fact a technology that has got multiple variance. We have got deduplication primarily that's based in block alignment, we've got deduplication for VTO product that has a got a different model. Data domains in stream, real time, variable window. There is a different style. River band, as you know, has a different style. So I do think it is a technology that has got multiple variance. I think the key here is not that they have deduplication, I think the key here is they have taken that and put it into a product line which is extraordinarily well suited as an appliance to slip easily into customers back-up environment of broad wave. It's easy to use, easy to employ, very efficient, etc. So to me, the deduplication is an enabler for a product solution, which they've done a particularly good job in implementing and across a very broad front. If you look at the accounts they target, which is basically the input I got from their team, they really think they have more value to add in non-NetApp accounts than they do in NetApp accounts. And the reason in the non-NetApp accounts, in general the customers haven't done anything to reduce the use of tape, don't have a solution for dedupe, etc. In the NetApp accounts, many of our customers already deploy NetApp secondary stores, they've done the deduplication primary, etc. They have reduced the utilization of tape and so on. So the remaining set of customer issues is not as severe as it is non-NetApp primary storage environment.

What I would add to that is that you could argue whether dedupe is a feature or a product, but I think what's unmistakable is that archiving and disk-to-disk back up are clearly market and customer problems that need to be solved. So data demand all sorts of deduplications to keep it apart but they also have IT replication and a whole other set of features that enables it to be competitive in those markets. So this isn't just about deduplication, it's about the whole product technology and the whole product solution targeting that market that is clearly high growth and are adjacent to markets that we currently serve.

Your next question comes from Wamsi Mohan – Merrill Lynch. Wamsi Mohan – Merrill Lynch: Can you give us some sense of what percent of customers, in your opinion, that are due for a hardware refresh, or actually when you end their maintenance contracts. And on the expense side, what is causing the opex to go up from current level, assuming you had already contemplated the extra week when you spoke about fiscal Q1 opex levels last quarter.

The question about the refresh as what percentage. I think that's a hard thing to tell. I think clearly the number of one-year agreements tells me that people aren't looking to extend the life of their equipment in this environment. But those aren't two-year agreements or three-year agreements and will they when that one year is up renew them again for another year, I don't think we know the answer to that question. It's going to be a function of spending, it's going to be a function of the economic recovery, so the short answer is I probably couldn't quantify that for you. Just to say that it is clearly a trend that we have seen this quarter. Actually beginning last quarter and continuing into this quarter.

I'm happy to answer the question on expenses or have Steve answer it on the next two or three Q.

Your next question comes from Aaron Rakers - Stifel Nicolaus & Company. Aaron Rakers - Stifel Nicolaus & Company: I want to understand, clearly you guys put up some very solid numbers on a relative basis in the software entitlement, as well as in the services line. As you see that kind of roll off your balance sheet. Clearly we have seen over the last few quarters some deceleration in the year-over-year absolute change in your deferred revenue. So I would like to understand do we continue to see some deceleration in the growth rates of those two what are increasingly important line items for you. If you could give any color on how we should think about deferred revenue rolling into the P&L that would be very helpful.

We track this very carefully what should be called our deferred revenue waterfall. So basically I would anticipate that you are going to see a continued overtime here, deceleration of the deferred elements reported as revenue. It's a simple matter of our business has flattened over the past multiple quarters and as that has happened we're not adding deferreds to the balance sheet as fast as we once were. And the old stuff coming off relatively at a pretty high rate. That said, the point that Tom made about all the renewals we're seeing this past quarter, and the large service contracts at the point of sale, keep postponing that deceleration a little bit. So I would expect to see some slight deceleration over the next couple of quarters but it's a mix in terms of total revenues. It's going to be roughly where it is today.

Your next question comes from Amit Daryanani - RBC Capital Markets.

Could you just tell me on the front why do we expect gross margins to be down sequentially in July? Does that just reflect that you expect sales to some degree fall off historical seasonality and be down as well? Or is it something in the mix of pricing that's driving that?

I think we expect to see gross margins north of 60%. I think we said approximately 61%. That would be down from this quarter. It just depends on what happens with our product mix there and our product business. You know, it's just a placeholder, if you will, there is a little bit of a range around that. [fine] will also play a big factor in there.

Your next question comes from Mark Moskowitz – JP Morgan. Mark Moskowitz – JP Morgan: Dan, I wanted to see if you could talk a little more about the inspiration for data dedupe in terms of the acquisition and your comp ends so they can be integrated cleanly. It is a bigger type of transaction than you have done previously and you have some deals in the past where you really weren't able to kind of see if your goals were beginning to accrue in terms of achieving greater technology capabilities. I just wanted to see if you can talk a little more about that.

I think certainly this is a little different than both Spinnaker and Decru. Spinnaker was completely integration. We tried to fuse together two separate technologies. That was a much harder problem than we anticipated going in. Decru had a little bit different outcome. While I agree with you it was not to the fulfillment of our expectations, I think it was because we saw that market shift much faster than we thought, the security move from data at rest to data on the laptop really quick and budget shifted and so the growth zoomed. Here I think the situation is such that first of all we understand that our sales organization know how to identify these opportunities, how to position to the customer it's an appliance style product, it's a storage product, it's not to dissimilar to the kind we already offer. It goes into a slightly different application environment but it's fundamentally outside of that very similar to what we have already been doing. In another way it actually looks architecturally like our products as well. I mean, it's an industry standard kind of platform, uses our shelf instead of a unique operating system on top and I have got to tell you the NetApp sales team really understands that model and how to sell high value software wrapped in an expensive hardware. So we think it's going to be a very easy integration. Even operationally. You know, I mentioned the same [zyrotech] shelves but it's very similar architecturally from support model. A lot of the business strategies that they pursued were very similar to NetApp's, things like auto support and so on. And we think it's going to be very straight forward. It enlarges the same facilities as well. I mean the headquarters is right down the street from us in Santa Clara. They have a facility that has all the support center in Research Triangle Park with about five iron shot from our office. Plus we are co-located around the globe in almost all the same places. We think it's going to be fairly easy to put it together.

I think maybe we would like to compare on a different transaction. I mean, certainly we did the Onaro transaction at the beginning of last year and that has been an unquestioned success. And Spinnaker was primarily a merging of operating systems. There was a lot of technical complexity associated with that and we still intend to reap the benefits of that deal, albeit probably a little bit later than we had hoped. But I think that the key dynamic here in all these deals in the end is that it's a market opportunity. And I think what's different is that Data Domain has already proven that there is a market opportunity and they have already built an organization to exploit it. So I think the business has a lot more momentum and I think there is a lot less investment required on behalf of NetApp to make a market. I think they already have momentum, they already have business, they already have growth and I think we're in a position to add to that as opposed to building it like we had to do in other situations. So I wouldn't draw an analogy between other transactions and this one. I think to all the points that they have said, the affinity of the product, the affinity of the sales force, the adjacency of the market segment, all those things lend themselves for a fair amount of optimism and on top of that, obviously their existing business success already speaks for itself.

Your next question comes from Brian Freed – Morgan, Keegan & Company. Brian Freed – Morgan, Keegan & Company: If you look at the historic execution of your sales force in Q4, which has always been phenomenal, how much of the stability you're seeing out there do you attribute to the macro environment versus the sales execution of your team?

We have that discussion internally in extremes. It is very difficult when we go to separate the year end effect of our fiscal Q4 and the sales incentives and the payment goals and so on from the underlying macroeconomic environment. You are correct that historically our sales team does a blow-out job in Q4 and this quarter it turns out that it showed up in the way of booking of service extensions. But nonetheless, they did a great job. And we really can't see through that to see what the underlying demand picture is.

Your next question comes from Mark Kelleher - Brigantine Advisors.

I just wanted to go back to the gross margins, particularly on the product margins. You're down five quarters in a row there. Can you just talk about the trends that are driving that, the factors underneath that, and maybe tie that into the competitive environment to the extent that that is affecting product margins?

So let's go back to a year ago where we made a reporting change as we entered this fiscal year. And basically what we did was we changed the way we reported our warranty expense. We previously, including the fourth quarter of last year, had warranty expense included in service and starting with the first quarter of this year, we moved those charges up to product cost of goods sold. That decreased the product gross margins by about 1.4% and added about 4.5% to service. It didn't change the total gross margin for the company. Throughout these years you know we have struggled with a currency headwind. In fact, this quarter you can see that compared to a year ago we are down 4%. It doesn't take much to calculate and figure out how much of that would be product and how much that impacted product so a substantial portion of the reduction, probably on the order of about 2%, is due to currency. This year we have also seen a dramatic shift in mix, to the low end of the product line and we have chronicled that in these calls over time here, so that's a surprise to nobody, and we've talked about how the software tax rate is this different at the low end than it is at the high end, so software tax rate difficulty goes with that. So those are the primary drivers. And in addition, in our manufacturing operation, which is primarily outsourced, we still have a number of fixed expenses. If you think about our departmental expenses, some of our fixed logistical expenses, those are fixed in time and as volume drops they pop up in terms of cost of goods sold and they reduce the margin as well. So those are the big drivers of the margin performance and product.

Your next question comes from Katie Huberty – Morgan Stanley. Katie Huberty – Morgan Stanley: I understand there's probably a wide range of outcomes for the July quarter but given you have now seen two quarters of well below normal seasonality, you're starting to see firming of budgets, you have good recent new account wins, is there a potential that at least the high end of that range of outcomes could include a scenario where July seasonality is better than normal? The decline is less than normal?

I think that any scenario is certainly possible. I think, as I said in my comments, we would expect this quarter to be down in a sequential sense and I'm not saying anything that would cause to forecast anything that would be a [blob], that's for sure. We're typically down, I think last year it was about 6% sequentially, 7%, something like that. And I would think we would look at the same kind of range. I don't see anything that would make that different this year.

We talked earlier about the fourth quarter effect on our sales force. The consequent action of that is that the first quarter had effect on our sales force as well. It's typically our weakest booking quarter so the combination of the normal seasonality of performance in our sales force in this quarter combined with the uncertainty in the market makes is really difficult. I don't necessarily believe that there is any reason that to be any more certain about our guidance than we were a quarter ago and that's why we aren't giving any.

Your next question comes from Bill Schultz – Credit Suisse. Bill Schultz – Credit Suisse: Question on the margin line as well. Your services margins were obviously far higher than we have seen in the past. Can you comment on what you would characterize at this point is a sustainable longer term and when do we start to see that trend down to sustainable margins and what would be the drivers there?

If you're talking about the deferred element in our P&L which our soft [inaudible], obviously that's not going to change. The services gross margin popped up this quarter primarily—two things. The short-term phenomena will probably wane here. In fact it's our professional services utilization did an all-time high. I would not expect to see the professional services utilization stay at that level and thus that will cause the services margin to drop slightly. On the other hand, the customer support business, as the volume grows, etc., we are really spreading a lot of the fixed costs that are associated with that business over a larger and larger volume build, so I actually expect to see for the next of couple of quarters to see the contribution of gross margin from the support business actually increase. Those two will have a somewhat offsetting effect but the professional services decline in utilization will offset it and drive the margin down a little bit. Bill Schultz – Credit Suisse: Just to clarify, if I could, historically we have seen them at a 30% range, 40% range, now we're in the 50% range. Where in those categories would you characterize as normal margins for the segment.

I think that over the course for the foreseeable future it's going to hover around a number that starts with a five.

Your next question comes from Chris Whitmore – Deutsche Bank Securities. Chris Whitmore – Deutsche Bank Securities: You indicated that you expect the Data Domain deal to be accretive after one year, using their internal forecasts. Can you share with us what those forecasts are and given that you don't have visibility to give guidance for July, what gives you confidence that those numbers are realistic?

You know, we have the same problem forecasting for them as we do for us. Although you take a look at various items such as sales capacity and things like that and you kind of get to a range. I will say that all the statements that Steve made had no assumptions in there about revenue synergy or any operational cost synergies in the sense of opportunities associated with consolidation of supply chains. For instance, I mentioned the [inaudible] opportunity. Or support centers, etc. Logistics and parts and maintenance. It is a very, very conservative assessment of expenses that will be saved primarily in the G&A functions, and that's really it. So we didn't, make any further assumptions and even with that little bit it becomes accretive in full force.

Your next question comes from Benjamin Reitzes – Barclays Capital. Benjamin Reitzes – Barclays Capital : Could you elaborate a little bit more on the quarter in terms of what you saw? You said that budget seemed to stabilized. Obviously it still seemed like product revenue was a little below expectations and there was a little better than expected on all the other lines obviously as you said. Could you just give a little more detail about linearity through the quarter on the product line and then why you say budgets stabilized and then just a little more color maybe about GO as well, Europe versus the U.S., if you don't mind.

The budget issue I think is one of our, if you heard last quarter's conference call, it occurred in February and a lot of customers are still going through a budget churn. I mean this wasn't any resolution yet as to what the capital spending plans were. Now that situation has been pretty much reconciled. I think we understand their intentions, although it's at a much lower level than sort of last year's spend was and I think you see that it's reflected in every single vendor who has reported results. My recollection is IBM was down about 20% in storage, EMC was down 20%, HP was down 22% yesterday. So I think you’re seeing less capital spending in general. And I think what happened in our case is customers decided that that equipment they had was typically amortized over three years and they could use it for one more. And so you saw the shifts move away from capital spending and into renewals of one-year duration. Our linearity was pretty good throughout the quarter and looked like any other typical Q4. I mean, the race to the finish line in Q4 is always kind of a [inaudible] experience but that's what we always go through.

Your next question comes from Rajesh Ghai – Thinkequity.

You mentioned that you have about 50 accounts with business sequential increase that goes back to Q3. Can you give us some color on the increase in demand with [inaudible] mix and what sense you have about spending going forward?

Let me clarify one thing because apparently I caused confusion then I will turn it over to Tom for the answer. There are two separate categories of accounts. One is what we call our top enterprise accounts, which are those which we think deserve special treatment. And the top enterprise accounts have an account management program. There's roughly about 40 or so accounts on that list. The top 50 accounts is the historical order pattern so when last quarter I referenced the top 50 from a year ago, I literally mean those who have rank order of ascent, or largest order customers to that quarter. That's not necessarily the TEAs, and I'm sorry I created that confusion.

As far as the TEA is concerned, we had great sequential performance from the TEAs, up 22%. But what I don't want to imply is that somehow they were in a distribution that somehow clustered between 20% and 25%. We had some that were [inaudible] huge and some that were up huge and they netted out at a net positive of around 22%. So I guess at this point it's good to see the momentum, it's good to see some business come back. A lot of it is in the form of renewals as opposed to product refreshes just now but it all counts. But I think at this point, given how uneven they are, it's hard to basically declare a victory and assess that that's some kind of a trend. Basically we had very, very wide range of performance and in the net, the gainers outnumbered the losers but I think until we see more consistent performance across the board I think we would be reluctant to say that anything has dramatically changed in the spending environment.

Your next question comes from David Bailey - Goldman Sachs.

Just following up on the increase in one-year maintenance renewals that you had in Q4. Have you seen any pick up in add-on storage sales this quarter and what impact does that have on margins.

That's a great question. I expected it but it didn't happen. I really did think, and this is me, I really did think that we would see the same pattern that we had seen in the last downturn in 2002, that as customers delayed whether it was new systems or upgrade the refreshes, that we would see additional add-on storage and that did not happen in the mix. We think that maybe more customers are turning on our primary storage deduplication capability and reclaiming storage but that's a speculation only.

I share those answers. I think we have been wrestling with that a little bit ourselves. The one theory that's out there as we shipped a bunch of low-end systems over the last year and a half and in a lot of cases instead of upgrading just storage only it's just as easy to buy a full system, so perhaps we'll see a little bit less of that. This past quarter we also saw a fair amount of increase in our mid-range business. But the main thing, maybe in prior quarters percentage of add-on storage and maybe some of those machines have reached their limit and now they're actually upgrading. So the good news is we saw a fair amount more FAS3000 platforms this quarter. And we do believe that the storage efficiency component is also in play. I think people are up against their budget limits and we have a bunch of features and I think it gives them a very, very strong incentive to actually deploy it before actually making the transition to buy new hardware.

Your next question comes from Brian Marshal – Broadpoint American Technology Research. Brian Marshal – Broadpoint American Technology Research: Question with regards to the Data Domain transaction. From a contribution analysis perspective it looks like 25% of the new co is going to Data Domain despite the fact that I guess they add about an incremental sort of 10% of revenue in EPS. Can you talk a little bit about anticipated cost in revenue synergies from the transaction and how that results in getting to accretion within 4 quarters?

First off, in anything we've discussed so far we have not included any revenue synergies in our projections once we start to do accretion and dilution. We said that we expect the transaction to be accretive within a 12-month period, and there is basically I think that we have quantified for that analysis and there is a base level thing, board fees, audit fees, legal expenses, IR. Facilities is huge, as Dan mentioned. There's a lot of fittings and facilities because our where we co-locate. IT costs. Things like that. So we are not pinning hopes yet on any cost of goods sold synergies that Dan referred to in the supply chain or we haven't quantified any impact of any benefits in our support business from leveraging their logistics costs with ours, etc. They're supposed to be very positive. Also, in the out years, beyond that first 12 months, it looks like there might be an opportunity for us to leverage our tax regime as their international business expands. That's how we came about these numbers.

The one area that I would add on that report is the area that we are not seeking synergy. Outside of infrastructure and heads we are not looking to achieve synergy on the engineering side in terms of development capacity and likewise, we're not looking for synergy on the sales side in terms of sales capacity. But certainly facilities, infrastructure, tools, all that thing are areas that we are going to look at more closely. But we've got no plans here today to reduce the development capacity of that organization or the sales capacity of that organization as part of our analysis.

Your next question comes from William Fearnley – FTN Midwest Securities. William Fearnley – FTN Midwest Securities: My question had to with pipeline as you measure it by outstanding quotes and proposals. What are you seeing on the direct side and when you are having planning discussions with the channel as you enter the new fiscal year on the pipeline side? Software service and hardware color, if you have any, would be helpful as well.

I can't break it down for you by category. We look at it in volume by geo and we have a very good business within the channel because also the channel guys get some degree of support from us in terms of quotes and configurations. The pipeline looks really good. I mean, it looks great. If this were a normal period, you would see us being a lot more bullish on the results on the breadth of the pipeline. The only problem is the conversion rates are very slow. And so need is high, customer engagements are high. Until they convert those to revenue is where the challenge is. And like in this quarter, some of the original deals that turned into renewals for software subscription and maintenance report started off as refresh deals. It's really hard to predict how this is all going to come out. That's part of the unsettled nature of the period we're in. But raw breadth of the pipeline looks very good.

Your next question comes from Brent Bracelin – Pacific Crest Securities. Brent Bracelin – Pacific Crest Securities: I have a follow-up question around the top 50 enterprise accounts. It sounds like you're seeing some signs of life there based on the rebound you mentioned. I guess I'm a little surprised that we didn't see a corresponding increase in the FAS6000 so my question is are you seeing a shift in buyer preference to lower cost, mid-range platforms or is there some kind of product transition here that is perhaps impacting the FAS6000 orders? And then as you think about if it is correct you are seeing some signs of life in the top 50, how sustainable do you think that is?

Well, as I indicated before, it's very uneven. So I think some of the top 50 have returned to health and I think have a sustainable growth opportunity. I think other ones are still struggling and I think there are some that are between that reached their period of which they actually absolutely to do some type of upgrade and add more capacity. And they may buy now but they may be quiet next quarter or down next quarter. So I think that in the net, they moved in the right direction but I believe that it's still too uneven to basically say that there is a clear pronounced trend that we can exploit there. As far as the 6000 is concerned, 6000 if roughly flat, in fact I think it was exactly flat sequentially. I wouldn't necessarily connect that to the top enterprise accounts. I think there is a fair number in those places, but in general I wouldn't say that those things are linked explicitly to each other.

One thing I would add is there doesn't seem to be a pattern by geo or whatever. The biggest pattern, the biggest correlators, of strength and weakness are on verticals. But even there, there are account-specific discussions. I mean, we said government was good, but one of our largest government customers was way down year-over-year and way down sequentially. They just got to the end of the build cycle. So there are some account-specific issues [inaudible] as well. There are exceptions to every rule.

Your next question comes from Jayson Noland – Robert W. Baird & Co. Jayson Noland – Robert W. Baird & Co.: I believe there are a number of NetApp alums at Data Domain and I guess, is that a benefit when you start to look at integration and would there be any potential for long-term technology integration between the two product lines.

We're not looking to have technology integration at the software level. We certainly we may can converge some of the hardware platforms. Like I said, they already use the same [zyrotech] shelves we do, no reason for redundancy there. But no, one of the nice attributes of this particular combination is that because there are so many NetApp alums over there, and because Frank Sloopman, the CEO, really tried to design the company after NetApp, the NetApp culture kind of pervades over there. I think it's going to be a very cultural integration. And they already certainly understand us a lot and I think that's going to simplify the problem a great deal. So now, there's really no attempt to smash the two together. As Tom said, we're going to run them as independently as possible from the viewpoint of both the technology development, which they've done a terrific job at, and we are going to retain all the sales capacity. At the same time we will probably link the organizations and where we can share some of the more basic kinds of services and components, such as disks.

I think as a practical matter, as times goes on, the fact that people from here have gone over there and been successful says that our sales force can be trained to sell that product. And the flip side is the fact that there are people over there that used to work here means that they know how to sell our product. So the simple fact of the matter is that these are two very adjacent technologies and two very adjacent markets with a very similar customer set and I think the opportunities for leverage are very large. I think that's why people have gone there and been successful and that's why I think that both sales organizations should be able to get leverage out of this transaction.

Your next question comes from Kaushik Roy – Wedbush Morgan Securities, Inc. Kaushik Roy – Wedbush Morgan Securities, Inc.: My question is on IBM. It seems like IBM came down a little bit. Was it because of poor execution of IBM or are you seeing their XIV product cannibalizing the entries a little bit or is it something else?

Actually just the opposite. I mean, you look at IBM's results last quarter, I think their storage was down 20%. The N series grew in that quarter. And it was up to a new high this quarter, so no we're not feeling any pressure from the XIV. IBM continues to perform very well for us, they're a growth component for us and we think that is going to continue in the foreseeable future.

I can't speak to the specifics of the XIV, all I know is that our numbers clearly dramatically outperform IBM at large. Clearly our value proposition is standing firm. If you look across the board about what's the appeal of our product line and their lineup, clearly NAS is one of them which the XIV is already, their other platforms have. And the other one is the storage efficiency features, which are also not present on the other platforms, and that applies whether it be NAS or SAN. So when I think about XIV, I actually think that the overlap is much greater with the rest of their portfolio than it is with ours. And as a result we were up 22% in a quarter where fully IBS storage was down a fair amount. So I think we are more than holding our own share-wise and if anything we are fully gaining, if you look at the numbers.

Your next question comes from Andrew Nowinski - Piper Jaffray.

I think you said that NAS revenues were impacted by a drop off in new system purchases within your top enterprise accounts. So just wondering, do you expect NAS demand to rebound once the spending environments within these accounts improve or is black level data growth simply outpacing file level data?

No, I expect the NAS business to bounce back. Clearly in our top enterprise accounts, there are accounts that we cultivate over a long period of time and as a result they go back to the early days of NAM and they tend to be more NAS-centric than our overall business. But clearly as the top enterprise accounts slow down, it disproportionately impacts NAS. So I expect that business to come back, our top enterprise accounts to get healthy again. I expect them to resume. And we made the point earlier that if we thought there was slowdown in the top enterprise accounts was because we had had our products replaced then I don't think they would be making service contracts to renew maintenance on them. So I think that our presence there is just as significant as it ever was. I think clearly the market has slowed down and the fact that we are concentrated on NAS business up in that space says that when they rebound I expect their NAS business to rebound. So I don't consider our current NAS position to be something that I would expect to see once the economy recovers.

The historical notion, you know, personal going NAS and database is going SAN or structure data goes on SAN, you've really got to get off that. You look at almost any of the major environments today, Oracle, SAP, VMware, etc., the customer has a choice to run those either NAS or SAN. It's strictly a question of what's most convenient for them, what they're they most comfortable with. So you can't read anything in to that at all. And furthermore, if you look back the last 20 years, the mix between structured and unstructured has been relatively the same in terms of the proportion of the two. Speculation is always one structure is growing one faster or whatever; it isn't true. For 20 years they've been almost the same mix in the market.

The other thing is they have a NAS acceleration in VMware environments and ultimately personal base in general. It's probably a new dynamic in that space as well so in that regard I would expect to see a fair amount of life in the SS business going forward.

Your next question comes from Alex Kurtz - Merriman Curhan Ford.

Looking at this Oracle/Sun acquisition, can you give us a sense of how that impacts your business. Oracle and Sun were talking about the Sun 7000 series adding about 800 customers over the last five months. Obviously Oracle being an important partner over the years. How does that impact your business as you look over the next couple of quarters.

It has not had any effect to date. And I think anything about the future would be really speculative until Oracle sorts out what they want to do and where they're going to go. It's a great question to track during the next quarter and maybe at the end of next quarter we can give you a better answer.

Your next question comes from Rob Cihra - Caris & Co. Rob Cihra - Caris & Co.: Any updates or anything new on the road map for Data ONTAP 8.

We're still on track and we expect to have it in the marketplace shortly before the end of summer, which I will point out is really September, so we're talking about Q1. And we're still on track and it's coming along well.

I don’t think we want to preannounce it but there is no development change to the situation that we said in the past.

Your next question comes from Glenn Hanus - Needham & Company. Glenn Hanus - Needham & Company: Maybe at least qualitatively on the revenue synergies that are possible, maybe you could just kind of lay out how you would step through capturing some revenue synergies. You mentioned international and helping them scale more into the enterprise. Maybe just talk about priorities there to go capture them and what might be the biggest opportunities.

From my perspective there is really a three priority performance. The first that you mentioned is international. More than 50% of our revenues come from outside the U.S., for them it's 21%. They've got a very immature, undeveloped distribution fabric, especially in Asia where they're just getting started. I think we can catapult that up in a hurry. So that's one. And there is a lot of channel development we have done in the last several years and I think this will flow into really. The second one is the place we call [inaudible] account-by-account. First pass they're in 300, we're in about 1,600 and the overlap is about 100. So it's roughly 1,500 storage 5000 accounts that we already have a presence with where this the potential to add to the list of proposals. And they have been really good at the entering new source 5000 accounts. So this is the third one. So when you think about accounts we are not in, we don't have any primary stores at all, I believe going forward this will be the easiest way to enter those accounts. It's the least disruptive. The customer doesn't have to change his application environments or whatever, it just slips right in. And it's lower risk. If the back up fails it's a bad problem, but guess what? It's not the same as if your enterprise fails. So I think it's going to be a primary focus for new account acquisition. So those are the three. I would add one more and that is channel programs. We have garnered many awards from channel support, other things like that. Their channel programs I would classify as fairly immature, good development space. Actually well advance for a company their age but a long way, not nearly as mature as ours. I think they will get some lift off that as well.

Your next question comes from Bill Choi – Jeffries & Co. Bill Choi – Jeffries & Co.: It's pretty well known out there among your customers that you have the new OS coming out ONTAP 8. What kind of feedback are you getting about that impact to current purchasing behavior? Do you think that had an impact on the NAS weakness in any way, and related to the strength in the maintenance contract renewals here, obviously the new OS becomes available to anyone on maintenance, did that help it and how do you ultimately look at getting impact of OS on current behavior.

I actually don't believe that customers are changing their behavior or holding things up waiting for ONTAP 8. If it's happening, it's happening on the margin and not significant in terms of the data that we see. As you indicated, the operating system runs on the same hardware as the current operating system. Customers that already have the software are entitled to it. So I think that people are moving ahead and we see more changes in buyer behavior around hardware releases than we do around software releases. So I don't believe that that's a factor, either slowing us down now nor something that's going to precipitate a rapid uptick in demand when it gets released.

I should point out also that the new release truly is a fusion of the two. And as installed, customers can continue either what we today call 7 mode, the current release line, or the new scale-out mode. And 7 mode they get significant new features and benefits and I think there's going to be a strong desire for them to upgrade. Even if they decide not to turn on the scale out feature soon. Bill Choi – Jeffries & Co.: The scale out feature seems to be really incremental, once you have the OS but do you anticipate that's really when they start buying the additional hardware?

I don't necessarily think so. I think you will see people deploy it on their existing hardware because for the existing customers to lay down data ONTAP 8, on top of what they have, they will look no different except they have a whole bunch of new features they can chose to deploy or not to play. So I think the initial roll out of data ONTAP 8 will be on existing hardware and then customers will step into the new functionality as they see fit. So I do not believe that it's a pressing demand now nor is it suddenly stimulate demand when it comes out.

Your next question is a follow-up from Wamsi Mohan – Merrill Lynch.

Welcome back. Let me guess. Expenses. Wamsi Mohan – Merrill Lynch: Yes.

I thought we were pretty clear that when we talked about the 405 to 410 range, we were talking about quarters 2 and 3 and out type of thing. Q1 we always said we were going to have the extra week. That extra week is about $15.0 million of expenses. There's nothing we can do about that. That's just the fact of having an extra week of expenses in the plan. In addition, in the first quarter we have our summer intern program, which we're going to honor this year again and they have roughly 50 to 70 summer interns coming in and so that's going to be an expense that we're going to incur. And finally, we mentioned that we are redirecting some resources to focus on growth areas and streamline our operations and we're making some investments there. And there's roughly about a million dollars of that as well. So that's what causes the first quarter to go up from the current run rate. After that, though, we expect that second quarter to be down in that 405 to 410 range we talked about, along with the third quarter.

Your next question is a follow-up from Keith Bachman – BMO Capital Markets. Keith Bachman – BMO Capital Markets: If the operating margin level for dedupe, why wouldn't it be accretive in the very near term?

Very close. I said it's accretive within 12 months. It's on the margin all the way out. It's marginally diluted in the short run. Keith Bachman – BMO Capital Markets: Right, marginally diluted at the EPS but at the operating margin, operating dollar level, wouldn't it be neutral to accretive straight away?

It depends on the transition cost. There are transition costs that come into play here now.

Your next question is a follow-up from Aaron Rakers - Stifel Nicolaus & Company. Aaron Rakers - Stifel Nicolaus & Company: With regard to Data Domain, can you give us a feeling for why now, because it does appear to be a pretty bold move by you guys. Was there anybody else involved or were you concerned that Data Domain wouldn't be available at some point in the future?

Like I said, they're very local, we've known these guys for several years. I have an ongoing dialogue with Frank Sloopman who I think is a terrific guy. I think the concept evolved over a long period of time. It's pretty clear—you should get this from Data Domain—that Frank is frustrated by his ability to build his sales capacity fast enough to attack the market opportunity as he sees it. I think he feels increasing like they're underperforming against the market potential because they just don't have the distribution capacity. I think the notion that everything that's out there should be theirs, is kind of what's driving the deal, and I don't think it's any more complex than that. And it's a terrific addition to our portfolio. And we really think it's a terrific company and a terrific technology. So it's just a nice win-win for both companies.

Your next question is a follow-up from William Fearnley – FTN Midwest Securities. William Fearnley – FTN Midwest Securities: Competitive win rates, you had mentioned that your win rates were the same but are you getting more pitches and proposals to hit and was there any change in win rates versus specific competitors during the quarter or what you see here in the near term as well, for the competitive standpoint?

I would say that there is probably not enough trend information to make things dramatically different than the way they were. I think the nature of this business that makes it a little bit complicated is that one of the big players out there that we're competing against is no decision. We talked about pipelines and I am sure other people are saying the same things about how great their pipelines are and a lots of stuff is going in the pipelines but the inability to get deals done is basically just causing it to well up. So in our scenario I think the volatility and the uncertainty is less about our competitive positioning than it is in our predictability about when customers are actually going to make decisions. So I think the pipeline looks robust, I think our win rates are substantially the same as the way they were, however, I think what is different is our inability to predict when customers are actually going to make a decision. And that's what most of our vulnerability is coming from. We say deals last quarters from customers that were deals we had long ago given up on and likewise there were deals that we thought that we had high confidence in that just got hung up at the last second.

This concludes our Q&A session.

Thank you all for joining us today. As we indicated, we will postponing our analyst meeting from June 4 to sometime in late September. I want to remind you one more time, this transaction with Data Domain is expected to close somewhere in the window of 60 to 120 days from now and depending on the time of that close, we may also chose to delay next quarter's conference call by a short amount, if it's advantageous to do so.

This concludes today’s conference call.